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We've lost count of how many times insiders have accumulated shares in a company that goes on to improve markedly. On the other hand, we'd be remiss not to mention that insider sales have been known to precede tough periods for a business. So we'll take a look at whether insiders have been buying or selling shares in IDEXX Laboratories, Inc. (NASDAQ:IDXX).
What Is Insider Buying?
It's quite normal to see company insiders, such as board members, trading in company stock, from time to time. However, such insiders must disclose their trading activities, and not trade on inside information.
We would never suggest that investors should base their decisions solely on what the directors of a company have been doing. But logic dictates you should pay some attention to whether insiders are buying or selling shares. For example, a Harvard University study found that 'insider purchases earn abnormal returns of more than 6% per year.'
The Last 12 Months Of Insider Transactions At IDEXX Laboratories
The Independent Director, M. Szostak, made the biggest insider sale in the last 12 months. That single transaction was for US$1.2m worth of shares at a price of US$209 each. That means that even when the share price was below the current price of US$280, an insider wanted to cash in some shares. When an insider sells below the current price, it suggests that they considered that lower price to be fair. That makes us wonder what they think of the (higher) recent valuation. While insider selling is not a positive sign, we can't be sure if it does mean insiders think the shares are fully valued, so it's only a weak sign. We note that the biggest single sale was only 27% of M. Szostak's holding.
Over the last year, we can see that insiders have bought 2820 shares worth US$602k. But insiders sold 19825 shares worth US$4.4m. Over the last year we saw more insider selling of IDEXX Laboratories shares, than buying. The chart below shows insider transactions (by individuals) over the last year. If you want to know exactly who sold, for how much, and when, simply click on the graph below!
I will like IDEXX Laboratories better if I see some big insider buys. While we wait, check out this free list of growing companies with considerable, recent, insider buying.
IDEXX Laboratories Insiders Are Selling The Stock
The last three months saw significant insider selling at IDEXX Laboratories. In total, insiders sold US$1.6m worth of shares in that time, and we didn't record any purchases whatsoever. This may suggest that some insiders think that the shares are not cheap.
I like to look at how many shares insiders own in a company, to help inform my view of how aligned they are with insiders. Usually, the higher the insider ownership, the more likely it is that insiders will be incentivised to build the company for the long term. IDEXX Laboratories insiders own about US$376m worth of shares (which is 1.6% of the company). I like to see this level of insider ownership, because it increases the chances that management are thinking about the best interests of shareholders.
So What Do The IDEXX Laboratories Insider Transactions Indicate?
Insiders haven't bought IDEXX Laboratories stock in the last three months, but there was some selling. Zooming out, the longer term picture doesn't give us much comfort. On the plus side, IDEXX Laboratories makes money, and is growing profits. While insiders do own a lot of shares in the company (which is good), our analysis of their transactions doesn't make us feel confident about the company. If you are like me, you may want to think about whether this company will grow or shrink. Luckily, you can check this free report showing analyst forecasts for its future.
But note: IDEXX Laboratories may not be the best stock to buy. So take a peek at this free list of interesting companies with high ROE and low debt.
For the purposes of this article, insiders are those individuals who report their transactions to the relevant regulatory body.
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If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.